Do you have dreams of making huge profits in a short amount of time?
That isn’t surprising. Day trading has an allure that not every profession has. What could be better than replacing your day job and making a lot more money?
But not everyone can do this. In fact, only 4.5% of traders will make enough money to live on.
If you want to be one of these people, then you have to become educated and make a plan.
Keep reading to learn what day trading is and the tips you need to get started.
What Is Day Trading?
You probably know about the process of trading stocks. All you need to do is pick a company that you think has promise and buy them on the stock market.
This practice can be a passive strategy that doesn’t require much effort.
Day trading is a little different. You could still be trading the stock market, but not for long-term gains.
You will be buying and selling financial assets over the day. You are looking for the small fluctuations that happen.
You might make less profit per trade, but your trade volume is much higher.
It can be very lucrative if you have a good strategy, but dangerous if you don’t know what you’re doing.
How Do You Get Started?
Before you start day trading, you need a plan to follow. If you go in without knowing what to do, then you might end up losing all your money.
To reduce the chance of that happening, follow the tips below.
Find the Right Platform to Trade On
Not all trading platforms are the same. You need to do your research on each one to make sure that you invest in one that will meet your needs.
You aren’t limited to stocks. You can also get into the Forex and futures markets.
Each one of these has their own skillsets that you need to learn to be successful. Make sure you learn about each one so you can pick what type of trading you want to do.
Once you figure this out, you can pick your broker.
Make sure you research how your broker handles customer service and any fees they have.
Determine How Much Money You Will Start With
You can’t get into trading if you don’t have money. Many markets require you to keep a large balance if you want to day trade.
In the United States, you need a balance of $25,000 if you want to start trading. Different markets will have other requirements. Make sure you have enough funds saved up to keep your minimum balance.
Next, you will need to determine how much of your balance you will keep investing. You don’t want to put your entire nest egg in from the start.
Find a Source of Financial News
If you don’t have a reliable source of news, you’re missing out on trends that you can capitalize on.
When you monitor financial news, you will be one of the first people to learn about good and bad events. When these things happen, it can create a lot of volatility in the market.
When the market is volatile, you have more of a chance to see higher profits.
Prepare a Strategy Before Starting
There are many strategies for day trading. It’s essential that you learn about each of them before you get started so you know the skills you need to develop.
You don’t have to start from scratch. Many proven strategies have been developed that you can learn from.
When you pick your strategy, you are going to be repeating this over and over again. You need to learn how to do this without hesitation and not make any changes when something unexpected happens.
Practice on Demo Accounts First
If you are just getting started, you don’t want to jump straight into a live account and start trading. You need to practice before you start trading with real money.
Most brokers have demo accounts that allow you to trade in a virtual environment.
Your demo account will allow you to test the strategies you are learning about. Try to find the plan you will be using quickly and focus only on using that in practice.
It can take a lot of time to hone your skills, so don’t worry about taking a while to invest your first dollar.
Set Goals and Constraints
Why are you getting started with day trading?
Are you looking to make a certain amount of money per day or retire early?
How much money can you afford to lose?
Make sure you answer all these questions before you get started. Answering these questions will inform you about what you need to do to accomplish your goals.
Knowing your constraints can also stop you from overspending. You shouldn’t invest more than you can afford to lose.
Pick Your Trading Time
When you’re trading, you want to be active when there’s a lot of activity.
For the stock market, this generally means working during a typical workday. This market is most volatile during the start and end of the trading day.
Futures see a lot of activity around the start of the day. These markets open a little earlier than the stock market, so you will need to get up earlier to get in on the action.
Forex is open 24 hours a day. When picking a time, it’s smart to focus on specific currency pairs.
Each one has a time when they are more active. Find these times, and you know when you should be trading.
Don’t Get Into Day Trading Without a Plan
It’s easy to start day trading. All you need to do is open up an account, deposit cash, and start trading.
But doing this the right way is much more difficult. Make sure you come up with a plan and learn all you can before you get started.
If you are looking for learning strategies you can use to learn about training, then head over to our education section. Our resources there will give you tips on learning the right way.